The Peso's Plunge Maybank Research Predicts Fresh Record Low

The Peso's Plunge Maybank Research Predicts Fresh Record Low

As global uncertainties persist, the Philippine peso (PHP) is poised to take a hit, potentially plummeting to new all-time lows in 2025. According to Maybank Research, the peso could reach a fresh record low of P60$1 in the first quarter, followed by a steep drop to P63$1 in April-June.

Global Uncertainties Drive Peso's Decline

Maybank's research unit attributes the peso's decline to uncertainty surrounding US policies. The ongoing trade war and potential protectionist measures could further strengthen the US dollar (USD) and weigh on the peso. As Saktiandi Supaat, Maybank's forex research head notes, USDPHP should trade elevated primarily due to uncertainty on US policies.

Current Record Low A Trend or a Blip?

The peso's current record low of P59$1 was first reached in October 2022, driven by concerns over the Bangko Sentral ng Pilipinas' (BSP) lack of aggressive interest rate hikes to combat inflation. This level was again breached in November last year on worries over central bank easing and potential protectionist policies under US President-elect Donald Trump. While the peso has since recovered to the P58$1 level, it has wavered this month due to Trump's trade war and threats to expand it.

Uncertainty Surrounds US Policies

Supaat highlights the uncertainty surrounding US policies as a significant factor affecting emerging market currencies like the peso. UST (US Treasury) yields for now look like they could keep trading elevated and volatile, especially as there is a possibility that clarity on US trade and fiscal policies may only gradually take hold.

Maybank's Worst-Case Scenario A 60-Percent Tariff

In their worst-case scenario modeling, Maybank suggests that if a 60-percent tariff were imposed on Asian exports, the peso could weaken beyond current projections. This underscores the potential impact of aggressive US trade policies on the peso.

Repatriation of Funds A Silver Lining?

Supaat notes that repatriation of funds by overseas workers can help limit PHP weakness. This highlights the importance of remittances in stabilizing the peso and supporting the country's economy.

BSP Rate Cuts Adding to Peso Volatility

Maybank expects the BSP to cut interest rates today, which could add to peso volatility. This move could put pressure on the peso given the uncertainty surrounding US policies and global macro conditions.

Conclusion A Challenging 2025 Ahead

As we look ahead to 2025, it's clear that the peso faces significant challenges driven by global uncertainties. While there are some silver linings, such as repatriation of funds, the overall trend suggests a potential plunge to new all-time lows. It remains to be seen how the BSP and other market participants will respond to these challenges.

Conclusion

This blog post has explored Maybank Research's predictions for the peso's performance in 2025, driven by global uncertainties. As we navigate the complexities of emerging markets like the Philippines, understanding the factors driving currency fluctuations is crucial.

Edward Lance Arellano Lorilla

CEO / Co-Founder

Enjoy the little things in life. For one day, you may look back and realize they were the big things. Many of life's failures are people who did not realize how close they were to success when they gave up.